Morningstar rises up and over rivals

Despite having a global presence and scale it was the specific product and services offered locally that have boosted the reputation of Morningstar, according to respondents of the Money Management Rate the Raters survey of dealer group and advisers. 

And while Morningstar has taken the crown that Lonsec wore for the past few years, Morningstar head of fund research, Asia-Pacific, Grant Kennaway said the survey pointed to the results of work begun three years ago. 

“A few years ago we reached out to our clients and built the Adviser Research Centre which has concentrated on making our research tools user-friendly for financial planners.

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"What we are seeing now then is the result of hard work done over the past few years by the teams under Tim Murphy, Chris Douglas (co-heads of fund research) and Anthony Serhan (chief executive),” Kennaway said. 

This has been reflected in the tide of opinion shifting to Morningstar in the Rate the Raters survey over the past few years, with 85 per cent of advisers and dealer groups rating it as ‘good overall’ in 2013, up from 63 per cent in 2012 and 30 per cent in 2011.

A further 15 per cent rated Morningstar as ‘excellent overall’ this year (see Table 1).  

However it is not as if Morningstar has worked for years to be an overnight success – it has operated in the Australian market since 1999 and is a well-known provider of managed funds research, data and software, both here and overseas. 

Kennaway said these two aspects of its history and business are important – but not responsible for planners and advisers considering the research house favourably. 

“We do have a respected global brand and are happy to highlight our independence, but that needs to have a good local solution that is applicable to the Australian market,” Kennaway said. 

“This was Morningstar’s first overseas play and our longevity here shows our commitment to the market in bringing our core capabilities of fund research, data and software to market, but also in bringing them together through our tools so they are accessible and useful to financial planning clients.” 

This issue of corporate ‘strength and capability’ also resonated with the survey respondents, with 70 per cent considering Morningstar’s to be excellent and 30 per cent rating it as good, reflecting very similar ratings from the 2012 survey. 

Mercer was also highly regarded in the corporate ‘strength and capability’ area. Three-quarters of planners rated its corporate strength as excellent, climbing up from less than 60 per cent in 2012.

Nearly a third of planners (29.4 per cent) considered Zenith to have excellent corporate strength, up from 7.7 per cent, reflecting its growth and impact in a small and competitive market (see Table 2). 

The stability and capability of staff with Morningstar also rated highly, with 85 per cent of respondents stating it was good and 15 per cent rating it as excellent.

Once again, Mercer and Zenith shadowed Morningstar with 100 per cent of respondents stating Mercer’s staff were good while 58.8 per cent rated Zenith’s as excellent.

Both figures were a slight improvement on those of last year. Lonsec also held its own with roughly two-thirds rating its staff as good and a third as excellent – much in line with last year’s ratings (see Table 3). 

Kennaway said Morningstar was not immune to people movements, but it was aware of concerns voiced in the industry regarding analysts and researchers lacking suitable industry experience and had moved to deal with those. 

“We are fortunate to have an average industry experience of 12 years within our fund research teams and will replace them with experienced hands from other offices overseas if required.

"At the same time Chris (Douglas) and Tim (Murphy) have more than seven years each with Morningstar and started as analysts here and are grounded in our culture and processes,” he said. 

For many planners and dealer groups that culture and process is most evident via Morningstar’s fund and manager research, with more than 45 per cent of survey respondents labelling it as good, while the same number label is as excellent. 

However, Morningstar is not alone in producing high quality research, according to survey respondents, with 71.4 per cent stating Lonsec’s research was good and 87.5 per cent saying the same about van Eyk. Zenith also rated highly, with 56.3 per cent stating its research was excellent (see Table 4). 

For Morningstar the results represent a marked shift from last year when 35 per cent of planners regarded the research as poor and only 11 per cent considered it excellent. 

This shift is further recognition of the ongoing work which has been taking place within Morningstar, Kennaway said, and reflects the steady approach it has taken to market. 

“It has been an incremental approach in building out our research, which comes from having a stable team that does its day-to-day work and focuses on the core tasks of researching funds and managers,” he said. 

“We have had interaction with our overseas offices and codified the way we do research and have not been distracted – which in a smaller environment and without the tools we have would have been harder to do.” 

Despite this, planners who are often active in promoting the value of their own advice, want to be sure that whatever they are spending on research is offering value to them as well. 

Survey respondents regarded Morningstar highly on this count, with 85 per cent rating the value of research as good and the remainder rating it as excellent.

Kennaway said this is not because the research is sold cheaply but rather that the research house has invested resources in demonstrating the value that can be gained from it (see Table 5). 

“We aim to have a continual relationship with clients and offer them access to our training manager, who we engaged in the past few years, to show clients how to use the tools we offer and that they purchase,” he said. 

“We also offer access to our analysts to discuss our ratings and our processes – and people value that. Seeing it expressed in the survey in the present is reflective of the work we have already done in the past.” 




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